When I first started in real estate over 20 years ago FHA insured loans were a huge part of my business, maybe 85% or more.
Over the years I've seen it drop to less than 5%, in fact I can't remember the last FHA financed transaction I've done; it certainly wasn't this year.
All that is fixing to change. HUD has made major changes to the FHA program in an attempt to get it competitive again assuming Congress approves.
"Expanding American Homeownership Act of 2006" has been approved in the US House of Representatives and seems headed for approval in the Senate soon.
This act would:
- Do away with the current rules banning FHA down payments lower than 3% and offer instead 1,2 or even 0% down payments to credit worth borrowers.
- Change to what's known as "risk based pricing", a mortgage banker term that just means people with good credit pay less and people with lesser credit pay more.
- Raise loan limits to each area's median home price.
- Open participation to mortgage brokers, the largest group of home loan originators. Currently expensive auditing requirements have frozen most of them out of the FHA market.
If all these changes work out as planned FHA could once again become the loan of choice for home buyers.
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